Biden’s decision to block Nippon Steel takeover creates uncertainty for U.S. Steel workers
WASHINGTON — By blocking acquisition of a Japanese company of US Steel, President Joe Biden said he was protecting good jobs in the American heartland. Maybe he’s putting them in danger.
In making a nearly $15 billion bid for the legendary Pittsburgh steelmaker, Nippon Steel had pledged to invest $2.7 billion in US Steel’s aging blast furnace operations in Gary, Indiana, and Mon Valley, Pennsylvania. It also pledged not to reduce manufacturing capacity in the United States over the next decade without first obtaining U.S. government approval.
“They were going to invest in the Valley,” said Jason Zugai, an operations technician and vice president of the local United Steelworkers union at a U.S. steel mill in the Mon Valley. “They promised no layoffs for ten years. We don’t want those promises from anyone.”
Zugai and some other Mon Valley steelworkers supported the Nippon deal, in defiance of the union’s national leadership, which pressured the Biden administration to end it.
Losing the Nippon-US Steel deal “will be a disaster for Pennsylvania,” said Gordon Johnson, who follows US Steel stock on Wall Street as founder of GLJ Research. “I really don’t understand. This is not in the interest of the employees. It is not in the best interest of US Steel shareholders.”
On Friday, Biden said he was halting the Nippon takeover — after federal regulators deadlocked on whether to approve it — because “a strong, domestically managed and operated steel industry represents an essential national security priority. … Without domestic steel production and domestic steelworkers, our nation is less strong and less secure.”
U.S. steel stocks fell 6.5% after Friday’s news.
The decision, announced less than three weeks before the president leaves the White House, reflects growth a bipartisan shift away from free trade and open investment.
Newly elected President Donald Trump had already spoken out against the takeover of Nippon. “As president,” he wrote on his Truth Social platform last month, “I will prevent this deal from happening.” Buyer beware!!!”
In a joint statement, Nippon and US Steel called Biden’s decision “a clear violation of due process and the law” and suggested they would file a lawsuit to save their deal: “We have no choice but to take all appropriate measures to exercise our legal rights. ”
US Steel was founded in 1901 in a merger involving American business giants JP Morgan and Andrew Carnegie that immediately created the largest company in the world. As the US rose to global dominance in the 20th century, US Steel grew with it. In 1943, at the height of the World War II manufacturing boom, US Steel employed 340,000 people.
But foreign competition – from Japan in the 1970s and 1980s and later from China – has gradually eroded US Steel’s position, forcing it to close factories and lay off workers. The company now employs fewer than 22,000 workers in a Chinese-dominated sector.
The U.S. government has tried over the years to protect US Steel and other American steel producers by imposing taxes on imported steel. During his first term, Trump imposed 25% tariffs on foreign steel, and Biden kept them in place or converted them to import quotas. Be that as it may, the trade barriers kept the price of American steel artificially high, giving US Steel and others a financial boost.
US Steel is profitable and has $1.8 billion in cash, although that is down from $2.9 billion at the end of 2023.
United Steelworkers President David McCall said Friday that U.S. Steel has the financial resources to go it alone. “It can easily remain a strong and resilient company,” he told reporters.
But US Steel has said it needs the money from Nippon Steel to continue investing in blast furnaces like those in Pennsylvania and Indiana.
“Without the Nippon Steel transaction, US Steel will largely turn away from its blast furnace facilities, putting thousands of good-paying union jobs at risk, which will negatively impact countless communities where the facilities are located,” US Steel warned in September. The company also threatened to move its headquarters out of Pittsburgh.
On its own, US Steel appears poised to focus on newer electric arc furnaces, such as the Big River plant in Arkansas, which can make high-quality steel products more efficiently and at lower prices compared to blast furnaces, Pennsylvania Director Josh Spoores said. head of Steel Americas Analysis for commodities researcher CRU.
“I don’t know if they don’t have the will, but they seem to have realized that it’s a much better investment, a much better return if they want to invest in an electric arc furnace instead of a blast furnace. Spoores said. He noted that no steelmaker in North America has built a blast furnace in decades.
One possibility is that another company steps in and makes a bid for US Steel.
In 2023, archrival Cleveland-Cliffs offered to buy US Steel for $7 billion. US Steel turned down the offer and ultimately accepted Nippon Steel’s nearly $15 billion cash offer, the deal Biden rejected on Friday. Maybe, analysts say, Cleveland-Cliffs will try again.
In a statement, Pennsylvania Governor Josh Shapiro warned US Steel management of “threatening the jobs and livelihoods of Pennsylvanians who work at the Mon Valley Works and at US Steel headquarters and their families.”
Shapiro also said that companies bidding to buy U.S. Steel in the future must make the same commitments to “capital investments and protecting and growing Pennsylvania jobs that Nippon Steel has put on the table.”
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Marc Levy reported from Harrisburg, Pennsylvania.